It appears that you are using either an older, classic Web browser or a hand-held device that allows you to view our content but may not work with every feature of our site. If you are using an older browser, please upgrade for the best experience.

ABSTRACT

Issues of emission leakage and competitiveness are at the fore of the climate policy debate in all the major economies implementing or proposing to implement substantial emissions cap-and-trade programs. Unilateral climate policy cannot directly impose emissions prices on foreign sources, but it can complement domestic emissions pricing with border carbon adjustment to reduce leakage and increase global cost-effectiveness. While border carbon adjustment has a theoretical efficiency rationale, its practical implementation is subject to serious caveats. This model-comparison study assesses the efficiency and distributional impacts of border carbon adjustment. We find that border carbon adjustment can effectively reduce leakage and ameliorate adverse impacts on energy-intensive and trade-exposed industries of unilaterally abating countries. However, the scope for global cost savings is small. The main effect of border carbon adjustment is to shift the economic burden of emission reduction to non-abating countries through implicit changes in international prices.

The research project on which this Discussion Paper is based was carried out under the auspices of the Energy Modeling Forum (EMF), which is an international expert platform for the discussion of energy and environmental problems. The underlying project is identified as "EMF 29." The main objective of EMF studies is to develop robust insights into energy and environmental policy issues and thereby help to put decision makers on an informed basis. To achieve this objective, EMF studies build on the collective capabilities of experts who apply and compare analytical models to the policy issues in a systematic manner. Researchers involved with this study have jointly investigated a set of pre-defined policy scenarios with harmonized assumptions and a common dataset, as is typically the case with EMF projects.

Like Us on Facebook

Follow us on Twitter

Events Calendar

We host a busy schedule of events throughout the fall, winter and spring. Past guests include: UN Secretary-General Ban Ki-moon, former Vice President Al Gore, and former Soviet Union President Mikhail Gorbachev.